George Osborne hails steady expansion but warns about turbulence in the global
economy

UK growth picked up in the final quarter of 2015, but the Chancellor warned of "bumpy times ahead" in an unforgiving global environment.

The economy expanded by 0.5pc in the three months to the end of December, following growth of 0.4pc between July and September, according to the Office for National Statistics (ONS).

Compared with the same quarter a year ago, the economy expanded by 1.9pc, which represents the weakest growth since the first quarter of 2013. Both figures were in line with economists' expectations.

This means GDP growth for 2015 as a whole stood at 2.2pc, which was weaker than 2014's expansion of 2.9pc and the Office for Budget Responsibility's forecast of 2.4pc in November.

George Osborne, the Chancellor, said the figures showed the UK economy continued to grow "steadily", even as he remained cautious about the outlook.

"Despite turbulence in the global economy, Britain is pushing ahead," he said.

"With the risks we see elsewhere in the world, there may be bumpy times ahead – so here in the UK we must stick to the plan that's cutting the deficit, attracting business investment and creating jobs."

It’s good news that the economy is growing steadily, meaning more jobs and security for people. Global risks mean we will stick to our plan.

The ONS figures showed fourth-quarter growth was entirely driven by Britain's dominant services sector, which expanded by 0.7pc on a quarterly basis.

However, the production and construction sectors, which have acted as a drag on growth for much of the year, shrank by 0.2pc and 0.1pc respectively, while manufacturing stagnated.

David Kern, chief economist at the British Chambers of Commerce, described Britain as a "three-tier" economy".

“The GDP figures demonstrate that the recovery remains fragile. While the services sector continues to grow, production is close to stagnation and the construction sector is now in recession. Every effort must be made to support both these sectors as we seek to rebalance the economy,” he said.

Mr Carney said above trend growth, higher core inflation and stronger wage growth would be needed to steer inflation back up to the Bank's 2pc target.

The pound rose against the dollar and euro in early trading, but Vicky Redwood, chief economist at Capital Economics, said Thursday's figures suggested UK interest rate rises remained well in the distance.

"The 0.5pc quarterly rise in GDP ... was still a bit below the economy’s probable trend rate, meaning that growth still isn’t strong enough to meet one of Mr Carney’s three conditions for raising interest rates," she said.